Mortgage approvals ended 2009 at double the level of a year ago and higher than at any time since the early stages of the credit crunch but the indications are of a slowdown to come.
December figures from the British Bankers Association (BBA) show 45,897 loans were approved for house purchase. The comparison with December 2008 (22,695) and September 2007 (54,913) shows the scale of the recovery but there are good reasons to think it may be about to run out of steam.
First, the total may have been distorted by the end of the stamp duty holiday on properties worth up to £175,000 at the end of the year. The rush to complete the paperwork means that approvals from January and Februrary were probably brought forward.
Second, the recovery has already been slowing down. In the eight months between the low point of November 2008 and July 2009 approvals rose by 131%. In the five months since they are only up 12%.
Third, approvals for house purchase had slowed down dramatically even before the credit crunch. The average monthly total between 2000 and 2006 was 71,000 - so approvals running at 40-45,000 a month are hardly exceptional.
Fourth, the average loan approved for house purchase actually fell between November and December from £142,200 to £141,100 - although that may have been distorted by a larger than normal level of cheaper purchases that were beating the stamp duty deadline but it was actually the first fall.
Fifth, High Street banks now control three-quarters of the mortgage market, up from two thirds before the credit crunch. That’s the result of takeovers, the exit of specialist lenders from the market and problems faced by building societies in keeping hold of savers’ deposits, but it leaves the housing market more dependent than ever on a handful of major companies.
None of which suggests that a broad-based recovery including large numbers of first-time buyers is going to happen any time soon.
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